1. The 50-20-30 Budget Rule
This budget rule is straightforward. It prioritizes your needs over wants to build your financial future.
50% For Basic Needs
20% To Savings And Debt Prepayment
30% For Wants
2. “Pay Yourself First” or Reverse Budget
This budget strategy to pay yourself first aligns well with a lifelong principle of personal finance. It is a reverse budget because, unlike other methods, you are saving before paying your bills. It emphasizes savings as the golden rule to learn early in life.
3. The Envelope (or Cash Diet) System
The envelope system may be a more comfortable budget method to adapt to if you are more cash-oriented. If you are paying for everything via credit card, this could be a rigid way to budget.
The Zero-Based budget originates from a business concept where every expense needs justification by a project’s need. This method is number-crunching heaven for those who need more structure in their budget. Essentially income minus costs need to be zero.
This budget is a personal income statement for an individual or household. It is similar to the zero-based budget but a bit simpler. It totals net income from multiple sources minus total estimated expenses equal plus or minus amount.
All of these budget methods have advantages and disadvantages. They can be used together, breaking envelopes into three bucks of needs, savings, and wants, and dividing into more categories with our needs,
The reasons for preparing a budget far outweigh any reasons not to do so. There are at least five different budgeting methods to choose from ranging from simple to more detail-oriented ways to review your finances.